Turkey Set to Roll Out 0.03% Tax on Crypto Transactions

Published on June 19, 2024
By: Pofan Palnudoti
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The Turkish Ministry of Finance is considering a significant tax reform to clean up public accounts and achieve fiscal balance. As part of this reform, they plan to introduce a 0.03% tax on cryptoasset transactions.

This is one of the most extensive fiscal changes proposed in Turkey in two decades. The government aims to generate around 3.7 billion TRY annually from the crypto transactions tax alone, which is equivalent to just over 113 million dollars. Bloomberg reported this information.

“The ministry is considering a 0.03% transaction tax on crypto trading, which has become popular among retail Turkish investors seeking a hedge against lira weakness and rampant inflation. The move would bring in 3.7 billion liras a year, according to official projections”.

The new fiscal package aims to generate 226 billion TRY (approximately 7 billion dollars), which currently represents 0.7% of Turkey’s gross domestic product. Turkey’s lawmakers emphasize that the nation’s budget has been severely impacted by the recent earthquakes. It’s important to note that in February 2023, a massive 7.8 magnitude earthquake devastated entire cities in southeastern Turkey, resulting in the tragic loss of over 50,000 lives. The quake caused extensive damage to bridges, roads, and airports across several provinces.

In early June, Mehmet Simsek, Turkey’s Finance Minister, highlighted the need for comprehensive tax coverage and proposed a minimum corporate tax. This contrasts with a 2008 tax reduction when Turkey eliminated taxes on stock gains.

Simsek’s announcement caused the Turkish lira to drop by 1.2%, with similar declines in both the Turkish stock index (1.4%) and the banking index (1.3%).

“Turkey will ensure no area remains tax-free. Our goal is to achieve fair and effective taxation”.

In 2022, the Turkish lira lost around 40% of its value, followed by a 30% drop in 2023. These figures are particularly concerning, considering that in January 2014, Turkey’s currency traded at about 2.2 units per US dollar. Today, the exchange rate stands at 32 units per dollar.

Although the new fiscal package is nearing discussion and the ruling coalition holds a parliamentary majority, it’s important to note that previous attempts to introduce new taxes faced strong opposition. Erdoğan’s party will have to navigate challenging debates.

Turkey: Joining the CBDC Trend as Well

Like Rwanda, Turkey is determined not to be left behind in promoting its centralized digital economy. In February of this year, it was revealed that the Central Bank had completed phase 1 of its ‘digital Turkish lira’, which included initial technology tests.

“During the first phase, our objective was to conduct tests in specific locations to assess user experience and system performance. For the digital Turkish lira, the priority lies in establishing a system that fully aligns with digital currency standards, rather than solely focusing on the technology itself.

In the second phase, we plan to expand our platform to include new participants and conduct pilot tests across many scenarios”.

To learn more about CBDCs, we recommend reading our article written by Karin Interfector.

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